Thursday, 28 February 2019

Ramsis train disaster kills 20

TL;DR

What We’re Tracking Today

Longtime readers know we have a soft spot for Qalaa Holdings’ USD 4.3 bn Egyptian Refining Company — and for Ahmed Heikal, who with his team kept the project on track despite a literal tsunami (it’s a long story), the global financial crisis and the events of 2011 and 2013. Well, guess what? They flipped the switch earlier this week and ERC has made its first ultra-low-sulfur diesel. The refinery, which will reach full commercial operations by the third quarter of this year, has successfully produced diesel with sulfur at 1.5 parts per mn (ppm) — if you’re keeping track at home, Euro V diesel is the cleanest burning in the world and has tolerance for up to 10 ppm sulfur. The start of production at ERC isn’t just good for Qalaa’s financials — it’s good for the air all of us breathe in the capital city and beyond: It will cut Egypt’s present-day sulfur emissions by about a third and reduce Cairo’s carbon footprint at the same time.

And what about the financials? Qalaa tells us that ERC’s cash flows could start to feel the impact of production in June when all units begin ramping up.

Tap or click here to take a tour of ERC in this video produced by Qalaa, including some very cool drone footage (runtime: 6:52).

The Sawiris brothers are two of just six Africans who have made it onto Bloomberg’s Bn’aires Index. The business information service estimates that Nassef (#230 in the world) is currently worth USD 6.76 bn while Naguib (#334) is worth just over USD 5 bn.

Global economy looking better: Global economic activity in February was “slightly above” what was expected in December and January, Bloomberg reports, with some suggestions from Goldman Sachs’ chief economist “that sequential growth will pick up from here."

A day of drama on Capitol Hill: The Donald’s long-time lawyer Michael Cohen made an abrupt u-turn yesterday when he testified in front of Congress, accusing his former paymaster of being involved in “a criminal scheme to violate campaign finance laws.” Cohen, who previously pled guilty to campaign finance violations, alleged that Trump paid USD 130k in illegal hush-money to adult film star Stormy Daniels, who claimed to have had an affair with Agent Orange. The WaPo and NYT have more.

Trump and North Korea’s Kim Jong Un are meeting again today in Hanoi, Vietnam, for talks. A diplomatic breakthrough could be in the cards — their official agenda for the day includes a “joint agreement signing ceremony,” the NYT reports.

In global miscellany worth knowing about this morning:

  • You can still Uber in London: A court in the United Kingdom has refused to allow a group of London taxi drivers to bring a legal challenge against a judge who had awarded Uber a 15-month probationary operating license, the FT reports.
  • Plans to expand the number of qualifying teams in the 2022 Qatar world cup to 48 from 32 remain complicated and a decision is unlikely before June due to the ongoing Qatar smackdown in the GCC, the Washington Post reports.
  • Egypt is set to host 150 athletes for the 2019 Pentathlon World Cup this weekend in an event open to all without charge, reports Ahram Online. The event runs through Sunday.

PSA- We’re looking at a relatively cool weekend with highs in the capital city of 17°C today, 16°C tomorrow and 19°C on Saturday. Expect cloudy periods in the afternoon all three days, but none of the rain that had previously been in the forecast. There’s still a chance of a shower on Monday, though, according to our favourite weather app.

Enterprise+: Last Night’s Talk Shows

Yesterday’s tragic train crash was the only thing on the minds of the talking heads, with some calling for blood and others commenting on the state’s response to the accident. The official death count currently stands at 20 people, while there were around 43 injured, Health Ministry spokesperson Khaled Megahed told Channel 1 News (watch, runtime: 3:24). We have more details on the accident in this morning’s Speed Round, below.

Conductors fighting appears to be the cause: The consensus among commentators and talking heads is that a fight between two train conductors led to the accident. Al Hayah Al Youm’s Khaled Abu Bakr screened a surveillance video of the fight (watch, runtime: 08:14). Cabinet Spokesman Nadder Saad phoned in to say that the first thing the donductors learn is never to leave the train while moving, adding that they clearly disregarded the protocol. Abu Bakr said all current conductors have to be reevaluated (watch, runtime: 02:36). Yahduth fi Masr’s Sherif Amer, who was at Ramsis station (watch, runtime: 02:55), explained that at 09:33 am, the train was moving without a driver at speed 60 km/hour (watch, runtime: 03:50).

The state was spared grandstanding by the talking heads, unlike in the case of past rail disasters. Masaa DMC’s Amr Khalil went so far as to say that a 20-year-old train is not new. He instead held the drivers and their negligence as the sole individuals responsible (watch, runtime: 06:23).

Social Solidarity Minister Ghada Waly told Abu Bakr that her ministry is providing support to the families of the dead and of the injured (watch, runtime: 07:58).

Speed Round

Speed Round is presented in association with

At least 20 people died yesterday when a train ran into a barrier inside Ramsis station in Downtown Cairo. More than 40 others were injured, according to a health ministry spokesman. The train derailed when it apparently hurtled unpiloted into the station, ramming into a concrete barrier at the end of platform six, the Transport Ministry said in a statement, without providing a death toll figure. The collision caused the locomotive’s fuel tank to explode, sending black smoke above Cairo’s downtown. Surveillance cameras in the station caught a glimpse of the collision as it occured (watch, runtime 00:20). In a separate incident yesterday, a train on the Matrouh-Alexandria rail route collided with a truck, killing at least one person and injuring six others, reports the local press.

Transport Minister Hisham Arafat resigned after the incident, according to a cabinet statement. The driver of the train in the Ramsis accident was arrested in Menoufiya governorate after trying to escape, Ahram Gate reported.

Runaway train during an argument? The Prosecutor General’s Office said it appears the accident took place after the conductor of the train that smashed into the station stopped his train to have an argument with another conductor. It appears that while the two were speaking, the first train began moving under its own power and rolled into the station unmanned,  Al Masry Al Youm reports, citing a statement by prosecutors.

Egyptian National Railways (ENR) and the Transport Ministry have formed committees to investigate the accident, according to a separate statement, and Prime Minister Moustafa Madbouly promised to “hold accountable” those responsible. The PM cut short a cabinet meeting to visit the site, according to Bloomberg. The government will pay EGP 80,000 for the relatives of the dead and EGP 25,000 for the injured, the cabinet said in a statement. Relatives of the dead are eligible for a separate EGP 30,000 insurance payout under policies held by the Transportation Ministry, the local press reports.

Highest accident rate in at least 15 years: ENR recorded nearly 1,800 accidents in 2017, the highest number in at least 15 years, according to a report by Declan Walsh and Toqa Ezzidin for the New York Times. State statistics agency CAPMAS put the total accident figure at nearly 11k between 2008 and 2017, the NYT adds, although not all incidents involve fatalities.

ENR had been working on overdue maintenance. Arafat had promised that we would see progress by mid-2019 on rail network upgrades, the acquisition of new rolling stock and the installation of electronic signaling systems. The House of Representatives has also been working on legislation that would open the railways to more private-sector involvement.

Pickups of the Ramsis train tragedy top coverage of Egypt in the international press this morning. See Bloomberg | Associated Press | the Guardian | the Express | the Sun.

EXCLUSIVE- Here’s how banks will have to calculate their cost-to-income ratio for income from treasuries under the new tax treatment: A draft agreement between the Federation of Egyptian Banks (FEB) and the Finance Ministry would see banks calculate their cost-to-income ratio for investment in government debt under the new tax treatment by dividing total bank expenses (excluding appropriations and depreciation) by total bank revenues and then multiplied by 80% of yield from government t-bills and t-bonds, according to a document seen by Enterprise. The cost-to-income ratio will be capped at 70% of revenue from government debt in 2019, 80% of revenues in 2020, 90% of revenues in 2021 and 100% of revenues in 2022, according to the document. No extra details on the calculation or the caps were provided.

We had reported yesterday that an agreement between the ministry and the FEB will see the cost-to-income ratio on income from holdings of treasuries capped at 50% (which, depending on how it is ultimately calculated, would be a less generous figure than above) and allow these expenses to be counted as deductible against pre-tax income on the income statement. Our source in government had also told us that this provision, as well as rules on the recognition and calculation of allowable costs, are expected to be in the executive regulations, which could be out “in a matter of days.” The Finance Ministry had previously agreed to mark the cost of investment in treasuries as deductible in the new tax treatment.

Egypt’s economic growth will beat expectations as sovereign bond yields fall and the government’s austerity program draws to a close, according to a report by Capital Economics. The country’s debt-to-GDP ratio has also begun to fall back as the primary budget balance enters a surplus for the first time in almost 20 years. The report predicts that the debt ratio will fall to around 75% by 2024, thanks to the cuts made to the public wage bill. “This underpins our view that GDP growth will be stronger than most expect in the next few years,” the report states.

But risks still remain: Egypt’s large foreign currency debt (around 30% of GDP in FY2017/18) means that the government’s financial position is exposed to fluctuations in the exchange rate. Rapid increases in global commodity prices would also spell trouble for the subsidy bill, with the report estimating that a 10% rise in oil prices would increase spending on fuel subsidies by around 0.4% of GDP.

And there is still more to be done: While the report praises the government’s success in restoring stability to the economy, it raises concerns that it is taking its foot off the gas a little too early and urges it to do more. “In the coming years, the focus will shift to the bolder efforts that are needed to lift Egypt’s potential growth rate, but we are increasingly concerned that these will fall short,” the report says.

IIF joins the chorus calling for deeper reforms: Achieving sustained economic prosperity will require that the state and military-affiliated companies shrink their role in the economy, according to a report by the Institute of International Finance (IIF). State influence on critical economic sectors, control over land use and privileged status for infrastructure projects has resulted in “deep-rooted structural distortions” in the economy which hold it back from competing with more successful emerging markets.

So what does IIF want Egypt to do? Noting that fundamental changes to the economic system could be politically and economically destabilizing, the IIF says the government should first maintain its current fiscal and exchange rate reforms — then kickstart the privatization program.

Israel’s LNG export dreams look increasingly dependent on Egypt: It is increasingly clear that an agreement between Cyprus, Greece, and Israel reached last December to proceed with an East Med pipeline will not give Israel the edge to exporting the region’s gas to Europe without Egypt, according to an analysis piece from Haaretz. For one, Cyprus and Israel are in dispute over the delineation of their respective East Med gas fields. Israel is also engaged in a maritime border dispute with Lebanon, and Turkey is actively trying to block Cyprus’ bid to exploit its gas fields. In an interview with the Cypriot news agency CNA earlier this month, Oil Minister Tarek El Molla said it best when he noted that feasibility study for the project would take up to two years, “which in itself is a luxury the region can’t afford any more.” Egypt, he added, was the lowest-cost option for exporting the region’s gas.

As Egypt secures its role as the region’s gas export hub, Shell sees demand for LNG growing in the next few decades, according to the the company’s LNG Outlook 2019 report (pdf). Natural gas is expected to account for 41% of total growth in demand for energy until 2035, according to the report. This makes gas the largest source of growth in global energy usage over that period. Global trade for LNG grew 10% in 2018 to 319 mn tonnes, bolstered by strong demand in Asia, particularly China and South Korea. China’s increasing demand for cleaner fuel is expected to be among the primary drivers behind the growth of LNG over the next two decades.

Egypt’s LNG imports fell 4% y-o-y in 2018, the report also noted.

Shell’s Idku increases exports of LNG to 800 mcf/d: Speaking of Shell, the company’s Idku liquefaction plant has increased exports of natural gas to 800 mcf/d, up from 500 mcf/d at the beginning of this year, El Molla told the domestic press.

EARNINGS WATCH- High-profile snackfood maker Edita recorded a 20.4% y-o-y increase in net profit in 4Q2018 to EGP 128.3 mn, up from EGP 106.6 mn in 4Q2017, according to the company’s earnings release (pdf). Revenues for the quarter reached EGP 1.1 bn, up 13.2% y-o-y from EGP 958 mn in 4Q2017 “on the back of both higher volumes and improved pricing as the company captured growing market demand with an optimized product mix.” Edita boss Hani Berzi noted that the company’s “strong performance for the year was driven by our strategy to capture growing demand with a tailored product mix suited for today’s market dynamics. The results are clear with volumes fast recovering to levels seen only before the devaluation of the EGP.” The year also saw flagship wafer brand, Fresca, launch in Morocco — as well as the leading snack producer maintaining its market position in core segments, holding a nearly 53% share of the cake market and growing its share of the croissant market to 64%. On a regional level, Edita’s gross export sales were up 33.0% y-o-y to EGP 315.9 mn, making up 8.3% of total revenues. The company highlighted growth opportunities in new production lines, new market segments, export growth and direct penetration to North African markets.

Egyptian Kuwait Holding (EKH) reported a 40% growth in recurring profit in FY2018 to close the year with USD 95.1 mn on the bottom line, the company said in its earnings release (pdf). EKH’s consolidated revenues in FY 2018 were up 16% to USD 480.2 mn. EKH flagged up significant catalysts for future growth in the earnings statement, noting that new seismic survey analysis has “revealed potential natural gas reserves of c.2,352 bn cubic feet” at its Offshore North Sinai (ONS) concession, which “significantly adds to ONS’ long-term growth potential and its ability to generate important new incremental value to our shareholders for years to come.” Suggesting a further upgrade in ONS’ total production profile could be on the cards, EKH said “expansion in the upstream natural gas business is at the core of our growth strategy and comes at exactly the right moment as Egypt is positioning itself as the premier energy hub in the eastern Mediterranean.” The company is also expanding its electricity generation capacity and growing into the electricity distribution market to “build a fully-integrated power provider” and is looking to replicate its “our home-market success in natural gas distribution on a regional scale,” company chairman Moataz Al Alfi said.

GB Auto reported a consolidated net profit of EGP 93.8 mn in 4Q2018, reversing a consolidated net loss of EGP 222.6 mn in 4Q2017 as the market began recovering, according to the company’s earnings release (pdf). Revenues for the quarter hit EGP 7.0 bn, up 28.4% y-o-y. “2018 was by all measures a year of market recovery and growth for our Group, yet by no means was it one without challenges," said GB Auto CEO Raouf Ghabbour. “We successfully realigned our portfolio and sales mix to shifting market dynamics and captured the recovery in consumer demand, while simultaneously having to navigate and absorb the ripple effects of new macro and market-level regulation.” Looking ahead, GB Auto is focusing on efficiency and continued optimization of its portfolio, noting the importance of working capital efficiency this year and saying, “Our strategy will see us grow our [local assembly] offerings during the second half of 2019 and expand our [full import] offerings to stay ahead of the competition.”

Elsewedy Electric reported a 17.3% y-o-y drop in net profit after tax to EGP 1.5 bn in 4Q2018, down from EGP 1.8 bn in 4Q2017, the company said in its earnings release (pdf). Revenues for the quarter grew 12.8% y-o-y to EGP 12.2 bn from EGP 10.8 bn in 4Q2017. Management attributed the growth in the topline to growth in the company’s turnkey projects for the quarter. “As demand for infrastructure investment continues to grow and as Africa is emerging as an important component in global supply chain, we are proud to be at the forefront of such challenging yet exciting frontiers,” CEO Ahmed Elsewedy said. “We are especially proud of our upcoming joint venture with The Arab Contractors in carrying out the USD 2.9 bn EPC contract for the Rufiji Hydropower Project in Tanzania which was awarded in December.” looking ahead, the company is looking to “engaging expansion opportunities, both organic or inorganic.”

Palm Hills Development (PHD) reported a net profit after tax and minority interest of EGP 811.7 mn in FY2018, up from EGP 805.6 mn in the previous year, according to an EGX filing (pdf). Revenues for the year recorded EGP 7.4 bn, up from EGP 6.6 bn in 2017.

Cement producer Arabian Cement Company reported a net profit after tax and minority interest of EGP 231.6 mn in FY2018, up from EGP 215.6 mn in 2017, according to the company’s consolidated financial statements (pdf). Sales revenues for the year reached EGP 3.3 bn, up from EGP 2.7 bn in 2017.

The National Bank of Kuwait-Egypt reported a 33.2% y-o-y increase in FY2018 net profits to EGP 2 bn, up from EGP 1.5 bn last year, according to a press release picked up by Zawya.

Eastern renews joint production contracts with BAT, Mansour: State-owned Eastern Company inked two five-year renewals of its joint production agreements with British American Tobacco (BAT) and Mansour International Distribution Co, according to an EGX disclosure (pdf). Under the agreement Eastern manufactures foreign “Target” cigarettes in partnership with Mansour, and “Pall Mall” and “Viceroy” cigarettes in partnership with BAT. The renewal of the former contract will take effect on 26 April and the latter on 3 June.

The news comes as we will see next week whether Eastern Tobacco will pilot the state privatization program. Sources had told us earlier this month that a debate over which company will pilot the program is being waged in the government, with the Prime Minister set to decide on the matter next week. Undoubtedly the contracts will give a welcome boost to Eastern’s shares should it kick start the program.

CABINET WATCH- Cabinet approves proposed changes to Anti-Terrorism Act: The Madbouly Cabinet approved yesterday proposed changes to the Anti-Terrorism Act that aim to cut off sources of funding to terrorists and confiscate their assets, according to a cabinet statement. The amendments state that the authorities must confiscate assets, properties, key documents, and any arms that belong to someone convicted of terrorism. They also mandate that landlords can face up to one year in prison and fines of up to EGP 10,000 for not informing and providing authorities with copies of their leases with any tenant. The statement did not state whether the amendments would require a vote from the House of Representatives.

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The Macro Picture

EM inflows in January could signal the start of a boom period for developing economies, CrossBorder Capital MD Michael Howell argues in a piece for the FT. Data from multiple sources has suggested that financial inflows into emerging markets hit their highest levels in over a year in January. CrossBorder’s latest estimates indicate that USD 58 bn of net inflows entered emerging markets (minus China) while figures from the Institute of International Finance showed that USD 51.1 bn was invested in EM equities and bonds last month. Expectations of further gains in the coming months are being driven by the US Federal Reserve’s recent dovish tone and continued the preference of investors for the USD. “Could January’s large monthly step-up signal that the vital EM capital flow/liquidity cycle is restarting again?” he asks. “It may.”

The risk cycle: When financial analysts talks about the EM risk cycle, they are referring to the process of boom and bust, caused in part by the Fed’s monetary policy. Easing — or even just the expectation of easing — can precipitate large inflows into emerging markets, weakening the USD. As emerging markets boom, local investors pour capital into safer overseas investments, causing the USD to strengthen. This in turn increases demand for safer assets which puts increasing amounts of pressure on emerging currencies, and causing capital flight.

But don’t always rely on the rating agencies to gauge risk: Credit rating agencies cannot be relied on to accurately monitor risk, Kate Allen writes in a separate article for the FT. “The problems comes when credit ratings are combined in a mechanistic and simplistic way with other ways of outsourcing decisions, such as passive funds and index compilers,” she writes. This leads to funds unwittingly investing in risky assets, believing them to be investment-grade. “It is an investment structure that is revealed to have done a bad job only when disaster arrives, as in the financial crisis,” she says. “By the time the downgrades come, it will be too late.”

Egypt in the News

Yesterday’s train accident in Ramsis tops foreign media coverage of Egypt this morning. We have full details in Speed Round, above.

On The Front Pages

Yesterday’s train accident was the common topic linking the front pages of all three state-owned newspapers. Al Ahram and Al Gomhuria led their front pages with the warning from Prime Minister Moustafa Madbouly that all those guilty of negligence would be held to account. Al Akhbar appears to be less preoccupied with the accident, with its top headline being President Abdel Fattah El Sisi’s meeting with Albanian President Ilir Meta.

Worth Watching

What does Britain mean to Egypt? Multiculturalism, love of Mohamed Salah and great literature are some of the more positive responses to that questions that BBC got. Colonialism, a history of stirring trouble in the region and being a little too prone to hypocrisy some of the more negative. In this BBC program (listen, running time 26:29), presenter Neil MacGregor talks to Ahdaf Soueif, Yasmine Shihata and Said Sadek about Egypt’s relationship with Britain over the past 150 years. Among other things, they look at the British occupation, the impact of the Suez crisis, the troubling legacy of Britain’s involvement in Iraq, Israel and Palestine, and the transformative effects of football.

Worth Reading

Poorer African countries are starting up welfare systems with impressive results, writes The Economist. In the five-year period between 2010 and 2015, sub-Saharan countries launched an average of 14 welfare schemes per year, up from five between 2001 and 2009. And the schemes are not small commitments: social safety-nets in these countries cost an average of 1.2% of GDP, just shy of the 1.6% average for developing countries. While funding for these schemes range from foreign donors bearing the full cost of welfare (as is the case with Tanzania) or by the government (Senegal), money does get to the people who need it, with local communities playing a large role in determining who gets cash and how much.

Diplomacy + Foreign Trade

Egypt and South Korea signed yesterday a MoU to enhance their investment relationship, the Investment Ministry said in a statement. The MoU aims to establish a framework to boost bilateral ties, exchange expertise and improve the business environment to accomplish development targets on both sides, the ministry said. The agreement came during a visit by an Egyptian delegation to the South Korean capital that kicked off earlier this week. Prime Minister Lee Nak-yeon said yesterday that South Korea is looking to boost economic ties with Egypt and cooperate with Cairo in the field of shipbuilding in the Suez Canal Economic Zone. During the visit, several companies including Hyundai Heavy Industries and Samsung Heavy Industries also expressed their interest in increasing investment in Egypt.

President Abdel Fattah El Sisi met yesterday with Albanian President Ilir Meta to discuss economic and political ties, as well as regional affairs, the State Information Service (SIS) said in a statement. The visit marked Meta’s first visit to Egypt since he took office. The two countries agreed to form a committee to boost parliamentary ties and establish a business council.

Egyptian agricultural exports to Saudi Arabia will require pre-shipment testing and approval starting from March, according to Food Safety Authority head Hussein Mansour, reports Al Masry Al Youm. The move comes after the Saudi Food and Drug Authority (SFDA) banned several agricultural products last year due to concerns over high levels of pesticides.

Egypt’s foreign ministry has accused Turkey of “showing hatred” in an official statement. The ministry condemned President Erdogan’s “continued embrace of the terrorist Brotherhood group,” in response to accusations of EU “hypocrisy” for attending this week’s Sharm conference.

Energy

Acciona, Swicorp complete USD 180 mn, 150 MW solar plans in Egypt’s Benban

Spain’s Acciona Energia and Saudi’s Swicorp-owned Enara Bahrain have completed three, USD 180 mn solar photovoltaic plants with a combined capacity of 150 MW in Aswan’s Benban complex, the former company announced. One plant will begin commercial operations in a few days, with the remaining two due to go online in the next few weeks.

Egypt’s Benban developers not made aware of 25% rise in costs

The Benban Solar Energy Developer Association representing companies working on projects in the Benban solar park were not made aware of an alleged 25% rise in investment costs, developers told PV Magazine. This came after reports emerged in the domestic press earlier this week that the Egyptian Electricity Transmission Company raised the cost-sharing bill under the Feed-in-Tariff program on the back of increased building material costs.

Banking + Finance

CBE issues guidelines for last year’s directive requiring banks to follow IFRS 9

The Central Bank of Egypt has issued guidelines for a previously announced directive requiring banks to begin presenting their financial statements in accordance with the IFRS 9 accounting standards, according to Amwal Al Ghad. According to the guidelines, banks following fiscal year (as opposed to calendar) reporting will be required to comply with the standards starting from June. The guidelines also require banks to temporarily hire an additional auditor.

Flat6Labs to triple investment fund capital by 2Q2019

Cairo-based incubator Flat6Labs plans to triple the capitalization of its investment fund to EGP 150 mn during 2Q2019, according to statements from Chief Investment Officer Dina El-Shenoufy reported by the local press. This will involve increasing its capital by a further EGP 100 mn. The startup accelerator is also aiming to graduate eight startups from its incubation program this June, and 16-18 startups by the end of the year. El Shenoufy also said that the company is aspiring to increase its investments in each startup to EGP 500-750k from EGP 350k.

Other Business News of Note

Investment minister explores investment opportunities with LG

Investment Minister Sahar Nasr and Finance Minister Mohamed Maait met with vice president of LG Hong Bom-Shak to discuss increasing the company’s investments in Egypt during their business trip in South Korea, according to an official statement.

Morning Routine

Tarek Abdel Rahman, Managing Partner at Compass Capital: My Morning Routine looks each week at how a successful member of the community starts their day — and then throws in a couple of random business questions just for fun. Speaking to us this week is Tarek Abdel Rahman, managing partner at private equity firm Compass Capital.

I’m Tarek Abdel Rahman, I’m 44 years-old and I’m the managing partner at Compass Capital, a leading private equity firm with a focus on value investments.

The truth is, anyone who works in private equity will always have a hundred things to do in a day, because you have so many different areas of business to think about. As the managing partner, I lead transactions on the potential opportunities for Compass to buy promising businesses. This means a lot of strategic thinking and planning, scoping opportunities, leading teams to assess the potential of a company and managing the acquisition processes from management meetings to due diligence to negotiating transaction documents and price. A lot of time you need to move swiftly and seize a good opportunity when one is presented, so in the course of a day you often have to switch gears very rapidly and be agile and responsive. That’s at the strategic level.

After acquiring a company, your role shifts, and you really assume responsibility for it. Since we are value investors and have an affinity for turnarounds, we get very involved in our portfolio companies, to the extent that sometimes at the early stage of the acquisition we become the executives of the company to make sure our game plan is implemented to extract maximum value. I am the acting CEO of Bonyan, the company that owns the Walk of Cairo. We’re extremely busy trying to get the Walk of Cairo ready for launch by September this year and are keen to introduce a retail and entertainment experience unseen before in the Egyptian market. This means taking care of numerous details to ensure everything is on track and that the company delivers to the standard we require. Then of course you have all the concerns that exist for any CEO — how to optimize performance, how to make sure your revenue generation is not only sustainable but steadily increasing, how to get the best from the company’s team, build and retain talent. There are a lot of different things to think about.

Because of this, my morning routine sets me up well for the day. I wake fairly early, at 6:30 am, and head to the gym first thing. Then I check Enterprise as I’m on my way into work; it’s great for giving me a concentrated shot of all that is important in Egypt, the region and the world. I honestly don’t know what I did before it was created. I pass by the Walk of Cairo and spend a couple of hours there to make sure things are on track and get some face time with the team. We’re set to have well over 100 retailers — both local and international — in one gated outdoor space resembling the high streets of major European cities in terms of both size and setup, spanning 60,000 square meters of gross leasable space, so the amount of work going into it is huge. Then I head over to the Compass office and it’s on with the rest of the day.

What does this look like? Well truthfully, it’s work work work for the day but I try to be home around 8 pm to have dinner with my wife and kids and spend some time with them before heading to bed around 10 pm.

I recently enjoyed reading The Smartest Guys in the Room, which is about the rise and fall of Enron. King of Capital, another recent favorite, is more of a success story, but also has plenty of twists and turns and highly recommended to anyone in finance, especially on the investing side. I also found Orwell’s 1984 a particularly important read, though of course it’s very dark. And a less well known book I also found very interesting was Lenin on the Train, which describes Lenin’s journey back to Russia to lead the revolution in 1917. I’m very big on TV series, and recently watched The Ted Bundy Tapes and Peaky Blinders.

Compass Capital was established by my partner Shamel Aboul Fadl in 2010 and he always sought to grow the firm based on attracting talent and expertise.

When it comes to the organizational culture we’ve created, we really value teamwork, discipline and rigor in our investment approach and when defining strategic initiatives to increase the value of our investments, as well as agility when it comes to the implementation process. We’re sector agnostic, so we care much more about the business model of the companies we acquire, and the values that guide them. There are a lot of opportunities in Egypt, which is our main focus area. Still, we face many challenges in making sure we recruit the right people, ensuring that the right business plan is put in place and that they are supported effectively. We actually prefer distressed assets; we feel that the support we offer is very important in terms of turning a company’s fortunes around.

I believe that Compass Capital’s niche is our genuinely hands-on approach. We’re very involved in the businesses we acquire and therefore we’re very selective. We’ve examined the prospect of buying 140 companies since 2010 and in the end we bought only four that we thought were a really good fit.

People don’t understand the level of involvement we have in our businesses. For us, buying a business isn’t just about financial acquisition. Not at all, in fact. In many cases we really take over. We become the management body of that business, and the business becomes ours while we implement our game plan. Then we bring the right management team on board to lead, and to pick up where we left off. So the whole process is about so much more than restructuring, or even maximizing profit — although of course these are both essential for it to work. We see something in the company when we buy it, then we want to make sure that the right plan is in place and is being implemented correctly so that the company fulfils its full potential.

I think that the way we use data analytics will be a real game changer in the field of private equity. Until now PE has not been affected by technology too much, although there have been some improvements in the way data is gathered and analyzed.

I think the problem that occurred with Abraaj has affected the industry significantly, especially in terms of fundraising, but I believe this will be a short-term effect. I expect in the long term much more competition in the PE space, which until now has had very few players in Egypt and the region as a whole.

Unscheduled time is quite rare and precious, and I think I use it well: spending time with my family, scuba diving, going out, reading, and watching TV shows and documentaries.

Many people have given me great advice throughout my career. Probably the best advice I’ve ever been given was to listen more than I speak. Another thing I learnt is that no one is indispensable. The team is really more important than the individual.

How do I stay organized? I’m a methodical person, so I have a to-do list that I make every day, and as I complete tasks, I tick them off one by one.

The Market Yesterday

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EGP / USD CBE market average: Buy 17.48 | Sell 17.58

EGP / USD at CIB: Buy 17.47 | Sell 17.57
EGP / USD at NBE: Buy 17.46 | Sell 17.56

EGX30 (Wednesday): 14,772 (-0.8%)
Turnover: EGP 661 mn (27% below the 90-day average)
EGX 30 year-to-date: +13.3%

THE MARKET ON WEDNESDAY: The EGX30 ended yesterday’s session down 0.8%. CIB, the index heaviest constituent ended down 1.2%. EGX30’s top performing constituents were Orascom Investment Holding up 3.0%, Arabia Investments up 1.4%, and Juhayna up 1.3%. Yesterday’s worst performing stocks were Ezz Steel down 3.0%, Arab Cotton Ginning down 2.7% and Pioneers Holding down 2.4%. The market turnover was EGP 661 mn, and regional investors were the sole net sellers.

Foreigners: Net Long | EGP +5.3 mn
Regional: Net Short | EGP -11.1 mn
Domestic: Net Long | EGP +5.8 mn

Retail: 71.0% of total trades | 69.7% of buyers | 72.2% of sellers
Institutions: 29.0% of total trades | 30.3% of buyers | 27.8% of sellers

WTI: USD 57.30 (+3.24%)
Brent: USD 66.66 (+2.22%)

Natural Gas (Nymex, futures prices) USD 2.79 MMBtu, (-0.25%, Apr 2019)
Gold: USD 1,322.50 / troy ounce (-0.45%)

TASI: 8,472.50 (+0.19%) (YTD: +8.11%)
ADX: 5,152.02 (+0.24%) (YTD: +4.82%)
DFM: 2,675.80 (-0.30%) (YTD: +5.77%)
KSE Premier Market: 5,538.96 (+0.67%)
QE: 10,136.00 (-1.17%) (YTD: -1.58%)
MSM: 4,112.31 (+0.57%) (YTD: -4.89%)
BB: 1,418.53 (+0.27%) (YTD: +6.08%)

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Calendar

26-28 February (Tuesday-Thursday): International Conference on Petroleum Mineral

Resources and Development, Egyptian Petroleum Research Institute, Nasr City, Cairo, Egypt.

28 February (Thursday): Scaling-up MENA SME’s Report Launch by Endeavor Egypt, AUC Tahrir, Cairo.

03-06 March (Sunday-Wednesday): EFG Hermes One-on-One Conference, Dubai.

05 March (Tuesday): The EBRD will release its Transition Report 2018-19, “Work in Transition,” with a workshop led by Managing Director for the southern and eastern Mediterranean region Janet Heckman, Salon Vert Meeting Room, Cairo Marriott Zamalek.

8 March (Friday): SHE CAN women’s entrepreneurship event, Greek Campus, Cairo.

10 March (Sunday): CIB to hold EGM meeting to look into planned capital increase.

10-12 March: Delegation of Japanese business visitors

March (date TBD): Traders Fair, Nile Ritz Carlton, Cairo, Egypt.

17 March (Sunday): A court will look into a lawsuit by a subsidiary of Arabian Investments, Development and Financial Investment Holding Co. (AIND) against Peugeot Citroen, seeking EUR 150 mn in damages.

17-18 March (Sunday-Monday): OPEC Joint Ministerial Monitoring Committee meeting, Baku (Bloomberg).

18-19 March (Monday-Tuesday): US Federal Open Market Committee holds two-day policy meeting to review the interest rate.

19 March (Tuesday): Portfolio Egypt Conference for non-banking financial services, venue TBD, Cairo, Egypt.

27-30 March (Wednesday-Saturday): Cityscape Egypt 2019, Egypt International Exhibition Center, Nasr City Cairo.

28 March (Thursday): Central Bank of Egypt’s monetary policy committee meets to review interest rates.

April: The African Tripartite Trade Area (TFTA) agreement is set to take effect in April after a majority from the participating governments ratified it, COMESA Secretary General Chileshe Kapwepwe according to Al Shorouk.

April: The EUR 250k first phase of Egypt’s national waste management program kicks off.

2-5 April: APPO Cape VII petroleum and energy conference, in Malabo, Equatorial Guinea.

4-6 April: LafargeHolcim Forum for sustainable Construction

17-18 April (Wednesday-Thursday): OPEC+ meeting, Vienna (Bloomberg).

20-22 April (Friday-Sunday): Spring meetings of the World Bank and International Monetary Fund, Washington, DC.

25 April (Thursday): Sinai Liberation day, national holiday.

28 April (Sunday): Easter Sunday, national holiday.

29 April (Monday): Easter Monday, national holiday.

30 April-1 March (Tuesday-Wednesday): US Federal Open Market Committee holds two-day policy meeting to review the interest rate.

01 May (Wednesday): Labor Day, national holiday.

06 May (Monday): First day of Ramadan (TBC).

23 May (Thursday): Central Bank of Egypt’s monetary policy committee meets to review interest rates.

June: International Forum for small and medium enterprises (SMEs).

04-05 June (Tuesday-Wednesday): Global Entrepreneurship Summit, The Hague, the Netherlands

05-06 June (Wednesday-Thursday): Eid El Fitr (TBC).

18-19 June (Tuesday-Wednesday): US Federal Open Market Committee holds two-day policy meeting to review the interest rate.

30 June (Sunday): June 2013 protests, national holiday.

11 July (Thursday): Central Bank of Egypt’s monetary policy committee meets to review interest rates.

23 July (Tuesday): 23 July revolution, national holiday.

30-31 July (Tuesday-Wednesday): US Federal Open Market Committee holds two-day policy meeting to review the interest rate.

7-11 August (Wednesday-Sunday) Eid El Adha (TBC).

22 August (Thursday): Central Bank of Egypt’s monetary policy committee meets to review interest rate.

29 August (Thursday): Islamic New Year (TBC), national holiday.

17-18 September (Tuesday-Wednesday): US Federal Open Market Committee holds two-day policy meeting to review the interest rate.

26 September (Thursday): Central Bank of Egypt’s monetary policy committee meets to review interest rate.

6 October (Sunday): Armed Forces Day, national holiday.

10-13 October (Tuesday-Sunday): Big Industrial Week Arabia 2019, Egypt International Exhibition Center, Cairo, Egypt.

29-30 October (Tuesday-Wednesday): US Federal Open Market Committee holds two-day policy meeting to review the interest rate.

9 November (Saturday): Prophet Mohammed’s birthday, national holiday.

December: Egypt will host for the first time the Pack Process trade expo for the Middle East and African region.

9-11 December (Monday-Wednesday): Food Africa 2019 Expo, Egypt International Exhibition Center, Cairo, Egypt.

10-11 December (Tuesday-Wednesday): US Federal Open Market Committee holds two-day policy meeting to review the interest rate.

26 December (Thursday): Central Bank of Egypt’s monetary policy committee meets to review interest rate.

Enterprise is a daily publication of Enterprise Ventures LLC, an Egyptian limited liability company (commercial register 83594), and a subsidiary of Inktank Communications. Summaries are intended for guidance only and are provided on an as-is basis; kindly refer to the source article in its original language prior to undertaking any action. Neither Enterprise Ventures nor its staff assume any responsibility or liability for the accuracy of the information contained in this publication, whether in the form of summaries or analysis. © 2021 Enterprise Ventures LLC.

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